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The Gates Path to an Energy Revolution

By Andrew C. Revkin August 24, 2010 6:42 pmAugust 24, 2010 6:42 pm

Andrew Councill for The New York TimesBill Gates

Jason Pontin, the editor in chief of Technology Review, recently spoke with Bill Gates about everything from software entrepreneurship to promoting polio vaccination in northern Nigeria. But the heart of the conversation, published today on the magazine’s Web site, was about how to make non-polluting energy technologies so cheap that coal reverts to being the shiny black rock it was before the industrial revolution.

Gates hammered on points reported here for many years: that without a big, and sustained, boost in spending on basic research and development on energy frontiers, the chances of triggering an energy revolution are nil; that while the private sector and venture capital investors are vital for transforming breakthroughs into marketable products or services, they will not invest in the long-haul inquiry that’s required to generate game-changing breakthroughs; that a 1 or 2 percent tax on carbon-emitting fuels could generate a large, steady stream of money for invigorating the innovation pipeline; that a declining emissions cap and credit trading system –- if it could survive America’s polarized politics –- would have to raise energy costs far beyond what would be politically tenable to generate a similar scale of transformational activity.

Here are a few highlights focused on energy, development and climate, but I urge you to click on the link at the end to read the full conversation:

Q.

The Gates Foundation has invested in solutions to big problems like infectious diseases in poor countries. Providing clean energy for the nine billion people the planet will hold in 2050 is a problem that’s equally civilizational in scale. What can philanthropy contribute to energy research?

A.

Well, basically not much. The energy market is an absolutely gigantic market, and the price of energy is a key determinant in improving lifestyles, whether for the rich, the middle-income, or the poorest. It seems slightly more intense for the poor: things like fertilizer and transport, or health care, are very expensive for them. You know, things like basic lighting are very expensive. But it’s a big enough market that if you come up with cheap ways of making electricity, then that should be done with typical big-firm risk taking, small-firm risk taking. On the other hand, the way capitalism works is that it systematically underfunds innovation, because the innovators can’t reap the full benefits. But there’s actually a net benefit to society being more R&D-oriented. And that’s why in health research, governments do fund R&D.

Q.

You are a member of the American Energy Innovation Council, the AEIC, which calls for a national energy policy that would increase U.S. investment in energy research every year from $5 billion to $16 billion…. I was stunned that the U.S. government invests so little.

A.

Yeah, particularly when you look at the DOE budget, and it looks so big–but the biggest part of that by far is dealing with the legacy of nuclear weapons production at various sites around the country. I was stunned myself. You know, the National Institutes of Health invest a bit more than $30 billion.

Q.

…If energy research is underfunded by at least $11 billion according to the AEIC, what is a better approach to funding new energy technologies? Or is this one of these problems that will require a variety of approaches — traditional, academic, agency, VC, corporate — because it’s so big a problem that it requires the cooperation of everyone involved?

A.

Well, yeah. I mean, you need cooperation, you need independent inventors, you need everything. It’s not a problem that lends itself to a Manhattan Project-type approach. It has to be low cost and usable in different circumstances. You can’t just get a bunch of smart people together and know which path you should go off and pursue. It’s amazing that that worked for the Manhattan Project.

Q.

It worked because it had a very specific end: they wanted to build the biggest bomb in the world and end the war.

A.

They knew what they wanted to do. I guess in a vague sense we can say that we want energy that costs, say, a quarter of what coal or electricity does and emits zero CO2. We can write that down. But there’s many paths to get there, each of which a realist would look at and say, “Wow, there’s a lot of difficult things along that path.” So I think it’s very important, both to give poor people cheap energy and to avoid hugely negative climate change, that the U.S. government and other governments fund basic research. But unfortunately, when the U.S. doesn’t step up on basic research, the world at large doesn’t tend to step up and fill the gap. I wish they would, but they don’t.

The irony is that if you actually look at the amount of money that’s been spent on feed-in tariffs and you properly account for it — tax credits, feed-in credits in Spain, solar photovoltaic stuff in Germany — the world has spent a massive amount of money which, in terms of creating both jobs and knowledge, would have been far better spent on energy research. But it kind of shows up as, “Okay, I’m paying a little more for electricity,” which is a very complex, opaque thing.

Where you’re mixing in low-cost hydro sources or things that have been fully depreciated with new things that are very expensive, it’s very complicated; when people are actually subsidizing some deployment, they don’t see it as much. Whereas if you say “Okay, we need to raise a tax to fund the R&D,” that’s more explicit.

I was stunned, when I did the work with the AEIC, to see that if you wanted the U.S. energy industry as a whole to fund this R&D, you’d only have to tax energy 1 percent. That is, the amount of tax you’d need to fund the R&D is an order of magnitude less than the amount you’d need to increase the price of energy in order to start to have a strong price signal in terms of efficiency and tradeoffs in new power plants. The tradeoffs in new power plants you can do through regulation. Just say, “Hey, you have to retire CO2-intensive plants at various dates, and you have to replace them with ones that meet various CO2 standards.” So that actually creates a market, in the sense that people have to buy those things. But it’d take a very small tax to fund even a significant level of R&D increase. And that’s using the term “R&D” very broadly, because in that $16 billion total that the AEIC called for, we had several things that are about pilot-plant deployment and financing. About one-third of it was not in traditional R&D. In energy we need to do the basic research. It’s materials science, it’s modeling, it’s storage, there’s a lot of things.

It is disappointing that some people have painted this problem as easy to solve. There are actually two articles in Scientific American where they allowed the author to say, “Oh, this is easy. Just go do a bunch of compressed air and sun,” or “Just go do a mix of things and it’s easy.” It’s not easy, and it’s bad for society if we think it is easy, because then funding for R&D doesn’t happen. If it was going to be easy, then that money really wouldn’t be necessary. But in my view it’s very necessary, and that’s despite the fact that if you take the innovation economy in the U.S., broadly defined, now versus 10 years ago, there’s a lot more energy activity…. [Read the rest.]

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By 2050 or so, the human population is expected to pass nine billion. Those billions will be seeking food, water and other resources on a planet where humans are already shaping climate and the web of life. Dot Earth was created by Andrew Revkin in October 2007 -- in part with support from a John Simon Guggenheim Fellowship -- to explore ways to balance human needs and the planet's limits.